Britain's financial watchdog has fined Barclays (BARC.L) 72 million pounds ($109 million) for cutting corners in checking wealthy customers involved in a huge transaction described by one senior manager as potentially the "deal of the century."
Barclays arranged the 1.9 billion pound transaction in 2011 and 2012 for a number of rich clients deemed by the regulator to be politically exposed persons (PEPs), or people holding prominent positions that could be open to financial abuse.
That should require a bank to conduct more detailed checks on them, but Barclays failed to do so and in fact cut corners with its compliance procedures, Britain's Financial Conduct Authority (FCA) said in a damning report on Thursday.
"Barclays did not follow its standard procedures, preferring instead to take on the clients as quickly as possible and thereby generated 52.3 million pounds in revenue," the FCA said.
Barclays, which received a 30 percent discount on the fine for settling at an early stage in the investigation, said the FCA made no finding that the bank facilitated any financial crime in relation to the transaction or the clients on whose behalf it was executed.
"Barclays has cooperated fully with the FCA throughout and continues to apply significant resources and training to ensure compliance with all legal and regulatory requirements," it said.
"ELEPHANT DEAL"
Just over 52 million pounds of the penalty on the bank comprised disgorgement, meaning clawing back the profit Barclays made on the transaction. That is the largest disgorgement penalty ever imposed by the FCA.
The watchdog declined to name the clients or many details of the transaction, which was known by those involved within Barclays as an "elephant deal" because of its size.
Indeed, the FCA said Barclays kept details of the clients and transaction off its computer system, and had agreed that if their names were ever revealed it would have had to pay them 37.7 million pounds.
"Barclays restricted the number of its staff who were involved in the business relationship and sought to address the financial crime risks that were associated with it in an ad hoc way," the FCA said in a 37-page notice on the bank's failings.
It said Barclays' senior management was concerned about completing the due diligence process for the deal quickly, with one manager quoted as saying he wanted to "race this through."
It is the latest conduct failing uncovered at Barclays, Britain's third biggest bank. In recent years, it was one of several banks to settle a global investigation into alleged manipulation of Libor interest rates.
Bob Diamond was the chief executive of Barclays from the start of 2011 until he left in July 2012. The head of its wealth management business in 2011 and 2012, which oversees dealings with rich clients, was Tom Kalaris. He stepped down in May 2013.
A spokesman for Diamond declined to comment, while Kalaris could not immediately be reached for comment.
The deal was the largest Barclays had ever executed for wealthy clients and in its early stages one senior manager said it could be "the deal of the century," according to the FCA.
The bank also failed to establish adequately the purpose and nature of the deal and did not sufficiently corroborate the clients' stated source of wealth and source of funds for the transaction, the FCA said.
